Umbrella Company Guide - Choosing an Umbrella Company

It may seem like there are thousands of umbrella companies out there: Parasol, ContractorUmbrella, Giant Strongbox, Liberty Bishop, Orange Genie, Atlantic Umbrella, Crystal umbrella, Danbro, Plan IT, Tarpon, Bedouin, Churchill Knight. . . to name just a few. 

The best advice we can give before choosing a company is, and it may seem obvious but you’d be surprised at the number of contractors who don’t, is. . . do your research. All companies are going to say they are the best and have outstanding service, what else could they possibly say? Some may even be recommended by recruitment agencies - it’s worth mentioning that some agencies do receive referral commissions for recommending certain companies which may affect why and who they recommend. Choosing an umbrella company is an important decision so why not try Googling them or search for posts on forum websites, you could also ask other contractors and colleagues. Our advice is, have a good hunt around, there are good companies out there.

Find below SJD's Top 7 tips on choosing an umbrella company:

1. Steer clear of umbrella companies that have: entry fees, exit fees or minimum term commitments with penalties for leaving early.

2. Avoid companies that link their fees to your rate; these can be expensive as your fees increase in line with rate increases. Umbrella companies like this often have complex fee structures that are in some way linked to contract values - why should you pay more just because you earn more? It's not like the umbrella company has to do anymore work. Clearly advertised, fixed fee structures are best.

3. Don't touch umbrella companies that tell you it is ok to claim expenses without receipts – in the event of an investigation by HM Revenue and Customs they would be disallowed and you would be liable for all the tax owing.

4. Look for an established umbrella company - this may seem obvious but a number of umbrella companies have sprung up recently and if they fold or go into administration, they will take your money with them, leaving you out of pocket.

5. It is often difficult to tell an ethical or honest umbrella company just from their website or brief telephone conversation. Generally speaking, if they are promising expense claims with 'No Receipts' and larger than what seems reasonable or possible take home pay, they are best avoided. All umbrella companies operate under the same HM Revenue and Customs regulations.

6. Are they compliant? Have they been reviewed or audited externally? This is becoming increasingly common. Of course an umbrella company will advise you they are compliant, they are hardly likely to tell you otherwise. Ask what their marketing claims are based on and remember it is you who the Revenue will investigate and not your umbrella company.

7. Finally the personal touch, yes fully automated and online only umbrella companies are cheaper, but you will most definitely need to speak to a human being at some point, especially if you are new to contracting. Do a test call and ask a few questions - will you have a dedicated account manager? Do they have service level agreements? Or will you be pushed from pillar to post speaking to 20 different people having to explain who and what you want 20 different times.

We hope you have found these tips useful.

If you would like to know more about Parasol or working through an umbrella company visit Parasol's site or contact a member of their team on 0800 470 1549 or email bestadvice@parasolgroup.co.uk.

Alternatively, if you have any questions about contracting through your own limited company or would like any further advice please call our New Business Team on 01442 275789 or email newbusiness@sjdaccountancy.com.

Click on the links below to read our other umbrella guides:

SJD Accountancy provides Umbrella Company Services to contractors and freelancers through our sister company, Parasol.

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SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

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If you have any questions about contracting or would like any further advice please call our new business team on 01442 275789 or email: newbusiness@sjdaccountancy.com. Our new business team is open Monday to Thursday (8am to 8pm), Friday (8am to 7pm) and Saturday (10am to 4pm)

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.